Newsletter-21

39 COMMERCIAL LAW Lifting the Corporate Veil: An Exceptional Concept of the Shareholders’ Limited Liability Principle* Att. Sezi Demircark Introduction One of the main motivations to form a legal entity is to limit the liability of its members and controllers for the obligations of the busi- ness of the legal entity. As a separate entity, a company is set up to shield the shareholders of a company from personal liability for the debts or negligence of the business. Thus, shareholders are not liable for the company’s debts beyond their initial capital investment, and have no proprietary interest in the property of the company 1 as per the limitation of liability and separation principle. Such principle is that the shareholders are held liable only toward the legal entity and not toward third parties, virtually creating a “veil” between the sharehold- ers and third parties. However, in certain circumstances, such veil may be lifted by a court order where a fraudulent and misleading use is made of the legal entity as an exception of the principle of a separation and limited liability principle. While this view appears in the Anglo- American Law, it has also been adopted in civil laws, including Turk- ish Law. This article examines the grounds upon which the corporate veil can be pierced under Turkish law. Being Held Liable by Lifting the Corporate Veil The majority of legal systems distinguish the corporate entity wholly from its members with the rationale to separate the company’s legal personality from the shareholders’ as the company is independ- ent and distinct from its shareholders. Similarly, the Turkish legal system provides clear distinction between the liabilities of the equity * Article of December 2016 1 Çamoğlu Ersin , Piercing the Corporate Veil, Banking and Corporate Law Jour- nal, June, 2016, Volume XXXII No. 2.